What is Fidelity Access℠ it and why it matters:

Fidelity Access℠ is a new API-based connection that enables third-party financial websites and account aggregation services to obtain information from Fidelity customer accounts, with the customer’s approval, without using customer login and password information in an attempt to “screen scrape” account information

Who’s onboard? Fidelity Access℠ is available now (November 2017), but no large account aggregation services (other than the obvious eMoney Advisor, a Fidelity company) as of yet have disclosed or announced their adoption of the Fidelity Access℠ API

Improved account security: Moving to API-based account aggregation reduces the number of times customers share their login credentials with third-party financial websites and aggregation services

Expect short-term frustration: Customers who leverage third-party financial websites will need to be patient as their providers transition away from using Fidelity login credentials to the new API. All providers must first meet Fidelity’s security and access requirements before connecting via the API. It’s quite possible that multiple aggregation providers and personal financial applications will not be approved by Fidelity to leverage Fidelity Access℠

What customers must do: All Fidelity customers will eventually have to manually enable account access to third-party financial websites using the Fidelity Access℠ dashboard when logged in to their Fidelity account

What financial advisers must do: Financial advisers who use data aggregated from clients’ Fidelity accounts will need to instruct clients to manually enable permissions through Fidelity Access℠ to the third-party aggregation services used by the financial adviser

Fidelity Investments announced the introduction of Fidelity Access℠, a new service that allows Fidelity customers to grant account access to third-party websites and aggregation services to obtain account balances, holdings, and transaction information using an API.

With Fidelity Access℠, Fidelity joins other financial institutions such as JPMorgan Chase, Bank of America, Wells Fargo (Gateway Channel) and others that have already introduced an API for third-party account aggregation as an alternative to “screen scraping” by logging in using a customer’s online account credentials.

One problem with sharing login credentials with third-party websites is the protection of the account login information and specifically the account password. Given the rapid increase in attacks on financial institutions, including the large security breach of Equifax affecting over 140 million customers in the U.S., hackers are obtaining passwords in record numbers for a variety of online logins that they then use in brute-force attacks to compromise online financial accounts. Many customers are at risk when they do not follow good online password hygiene by using the same password for multiple online accounts.

Cleaner Data

A few positives emerge from an API-driven connection like Fidelity Access℠. First, account authentication and data exchange is performed using well-defined protocols. Overall, security is enhanced as Fidelity Access℠ authentication is performed using the OAuth open standard.

Second, the quality of data obtained via API is much higher than “screen scraping” since the data is transmitted using conventional API functions. Such functions clearly identify datatypes being relayed over the API, so there’s no ambiguity over what pieces of data represent a security name, security symbol, transaction date, transaction amount, or total value of a holding.

Finally, institutions like Fidelity are able to reduce the bandwidth demands for websites customers use to log in to view account information, which were never intended to be accessed in high volumes by third-party aggregators.

Instead, institutions will now be able to shift the bandwidth required for account aggregation to separate services that support access over the API and reduce the demand on public website login page access.

Expect a Rough Transition

Sometime in 2018, Fidelity will no longer allow third-party account aggregation services to log in to customer accounts using shared online credentials and ultimately “break” the aggregation functionality.

At that time, Fidelity customers will need to manually enable account access via their own Fidelity Access℠ dashboard for each of the aggregation services they wish to continue to use.

The challenge here for customer satisfaction will be the rate of adoption among the dozens, if not hundreds, of third-party personal financial management apps into the Fidelity Access℠ program. It is possible that the transition will actually limit choice among customers as to which personal financial management apps can access Fidelity account information. Today, customers can enter their login credentials into any financial management app they wish to enable aggregation of Fidelity accounts without first obtaining Fidelity’s approval.

Also, many customers maintain relationships with multiple financial institutions for a variety of reasons, so as this trend of migrating to API-based aggregation plays out, customers will be required to manage account aggregation access not only for accounts they hold with Fidelity, but also with accounts at a variety of other financial institutions where the conduct business.

The common denominator for client satisfaction here is the aggregation provider that is able to quickly adopt as many of the institution-specific APIs as possible.

After all, what good is it to permission Fidelity Access℠ to the Personal Capital dashboard when Personal Capital is not approved to connect with other financial institution aggregation APIs? The incomplete aggregation decreases the value of the consolidated dashboard in services such as Personal Capital when it is not able to aggregate all of a user’s accounts.

Tepid Adoption

One other interesting take on the Fidelity Access℠ announcement is that none of the major aggregation providers were identified as adopting the new API (eMoney Advisor is, of course, onboard, which is expected as it is a Fidelity company). Other API introductions launched with at least one major aggregator on board, such as JP Morgan Chase and Intuit’s announcement in January 2017.

Eventually, adoption of Fidelity Access℠ will be very likely among the major aggregators, but I wonder what the thought process was behind the announcement of Fidelity Access℠ without also announcing which of the larger aggregation providers have already begun to leverage the API.

We’ll have to stay tuned for more updates here as the success of Fidelity Access℠ (and satisfaction of Fidelity customers) depends heavily on how widely adopted Fidelity Access℠ is among the major aggregation providers.

Today’s episode is brought to you by eMoney Advisor, featuring a new Client Onboarding process as a part of their leading client experience. Onboarding replaces printed fact-finding documents with an automated, digital workflow, allowing clients to populate their own personal financial information online from anywhere — adding an extra layer of convenience and efficiency to your service.

[Now the big story this week is news from Charles Schwab, as the largest custodian for RIAs announced plans to introduce Schwab Intelligent Advisory™ in the first half of 2017. In the press release, Schwab’s Neesha Hathi said that Schwab Intelligent Advisory is designed for emerging or mass affluent investors who don’t have complex financial situations, features access to CFP® professionals who are available by phone and videoconference, and charges fees of just 28 basis points (disclaimer!) with a maximum of $3,600 a year.

Now this isn’t as much of a technology story as it is a marketing story, because the technology for Schwab Intelligent Advisory portfolio management is that same that powers Schwab Intelligent Portfolios for retail investors and Institutional Intelligent Portfolios™ that you can use in your own RIA if you custody assets with Schwab.

But, how does that make you feel knowing you’re using the same technology that your custodian will use to offer its own human-assisted advisory services to mass affluent clients?

So I was asked if I thought RIAs should be concerned about this announcement, and I said yes, RIAs should absolutely be concerned. Look, when it comes to getting a prospect to buy what you do, most of the time it’s not what you say, it’s what people hear, and I’ve gotta admit, prospects are hearing comprehensive plans by CFP® professionals with 24/7 access, all for 28 basis points (disclaimer!)? Unless your prospects hear something far more different and compelling from you, I just can’t believe they’ll be willing to pay more than three times the price of Schwab Intelligent Advisory for your services.

And I’m not ignoring Vanguard’s Personal Advisor Services, which also employs hundreds of CFP® professionals and charges 30 basis points (thank you!), with more than $40 billion on the platform and growing. A few of you have told me that you’ve lost clients to Vanguard’s service, which is also likely going to happen with Schwab Intelligent Advisory, but the difference with Vanguard is that they’re not also soliciting your custody business while simultaneously soliciting mass affluent clients.

But the executives at Schwab surely know what they’re doing, and I think they know their target RIA client pretty well, which I suspect largely enforces client account minimums of a million dollars or more, so Schwab Intelligent Advisory really isn’t a competitive threat, because it’s not intended for the high-net worth clientele targeted by the largest RIAs that generally choose to custody with Schwab.] Charles Schwab today announced plans to expand its suite of wealth management and advisory services with the launch of Schwab Intelligent Advisory, a hybrid advisory service that combines live credentialed professionals and algorithm driven technology to make financial and investment planning more accessible to consumers.

[Now one of the things not mentioned about Schwab Intelligent Advisory is account aggregation, which is the focus of my next two stories, starting with Finicity, as the company announced it secured $42 million in a new funding round led by Experian.

This is the first time I’ve mentioned Finicity in my broadcast, but I have a popular post on FPPad from March of this year when Intuit announced it was shutting down their Financial Data API and selected Finicity to offer façade APIs to developers who needed to transition off of Intuit’s aggregation.

In the wake of that change, Guide Financial, which was acquired by John Hancock in the summer of 2015, shut down back in October, but other than that I haven’t heard of other significant disruptions among other tech providers.

What remains to be seen is whether or not Finicity makes an attempt to offer aggregation services to advisers, either directly or by partnering with existing technology providers, so if you have some intel you can share with me, I’d appreciate the heads up, otherwise advisers can continue to engage aggregation providers such as Morningstar ByAllAccounts, Aqumulate, eMoney, Quovo Wealth Access, and Envestnet|Yodlee.] Finicity, a leading provider of real-time financial data aggregation and insights, has secured $42 million in new funding. Experian, a global innovator in consumer and business credit reporting, led Finicity’s Series B round, along with a venture debt facility provided by Bridge Bank and participation from existing investors.

[And speaking of Envestnet|Yodlee, my last story highlights the rollout of Envestnet|Yodlee to the Envestnet|Tamarac platform. While at the Schwab IMPACT conference in October, I had a chance to connect with Brandon Rembe to get a quick update on what this new feature means for advisors.

I’ve linked the full interview over here and in the description below, but let me just finish by saying that technology like account aggregation is still a bit of a differentiator for you, since it helps you know as much as you can about your client’s total financial picture, and not just what clients have at one custodian, such as, ohhh, Charles Schwab, which is a complete coincidence.] Envestnet | Tamarac now enables advisors to add assets and liabilities to households in Advisor View™, helping them expand their focus and deliver more holistic advice to clients.

A few parting words:

Before I sign off, you need to know that I have some big plans in the works for FPPad content in 2017. I’m not going to go into the details right now, but what you will notice is that this broadcast, the almost-weekly videos, will be taking a bit of a hiatus for a few months.

But don’t worry, I’ll still be providing my independent insight on financial technology that thousands of you count on as you navigate what I feel is an exciting, unprecedented opportunity in the business of financial advice.

Scottrade® Advisor Services now has agreements with two leading industry solutions providers to help RIAs run their day-to-day routines. Scottrade signed agreements with Morningstar, Inc. and Orion Advisor Services, LLC to offer their services at a discount.

Yahoo, already reeling from its September disclosure that 500 million user accounts had been hacked in 2014, disclosed Wednesday that a different attack in 2013 compromised more than 1 billion accounts.

We recently announced an update to Evernote’s privacy policy that we communicated poorly, and it resulted in some understandable confusion. We’ve heard your concerns, and we apologize for any angst we may have caused.

Personal Capital, the leading digital and professional advisor based wealth management firm, today announced that IGM Financial Inc. has completed the firm’s Series E round. Additionally, Silicon Valley Bank has extended $25 million in credit to the firm.

Intuit identified Finicity as a solution that will provide a “façade” API interface that translates Intuit-structured API calls into Finicity-structured API calls.

Financial Data API Backstory

The Financial Data APIs from Intuit allow developers to link to end-users’ banking accounts from within their application.

In September of 2012, Intuit announced that it was opening up the technology that powered Intuit products like Mint.com, Quicken, and QuickBooks to the developer community via a library of APIs that it called Customer Account Data (CAD).

Customer Account Data, which was rebranded Financial Data APIs, is composed of two separate products: the Transactions API and the Identification API Beta.

The Transactions API offered connections to roughly 20,000 US and Canadian financial institutions, enabling third-party developers to quickly and cost-effectively deploy aggregation functionality to a wide array of financial sources.

The Identification API Beta facilitated customer’s identity and banking account verification using banking credentials. Developers were able to configure ACH connections via the API instead of relying on microdeposits (a series of deposits under $1 that the customer verifies) and a process called “fatfingering.”

FinTech Floodgates

The general availability of the Intuit Financial Data APIs opened the floodgates of all sorts of new B2C fintech startups that featured the aggregation of users’ financial accounts. These startups included popular names such as LearnVest, SaveUp, Hello Digit, BillGuard, and more.

A similar increase has taken place among B2B account aggregation providers, with companies like Blueleaf, Wealth Access, Quovo, Plaid, and Right Capital all appearing with some type of advisor aggregation fintech solution over the last four years.

Prior to the new wave of account aggregation providers, advisor solutions were dominated by four key players:

Betterment (retail and Institutional, based on their use of both Plaid and Quovo)

Note: Prior to August 30, 2016, I had Right Capital in the list above. After connecting the Right Capital co-founder Shuang Chen, I learned the company had considered Intuit’s API for aggregation at one time, but ultimately decided to engage Yodlee for account aggregation. Therefore, Right Capital will not be affected by the Intuit API shutdown.

In its press release, Intuit identified Finicity as an alternate provider of aggregation services.

We have identified a new aggregation partner, Finicity, for whom this service is a core part of their business. Finicity can offer long-term benefits and service for our aggregation customers. To minimize developers’ engineering work to switch APIs, Finicity will provide a façade API interface that translates Intuit-structured API calls into Finicity-structured API calls.

The “façade API interface” means that developers with existing code that calls on Intuit APIs will not need to change their codebase. Instead, Finicity will publish an API interface that is 100% compatible with existing calls to the legacy Intuit APIs and return data to the developer’s application as if Intuit’s APIs never went away.

Who is Finicity?

For me, Finicity is a newer name in aggregation that came to my attention last year while monitoring Quora for details on Yodlee despite founding the business in September 2000.

While the Finicity compatibility endorsed by Intuit sounds good for existing developers, there are certainly other issues to consider before building a business on top of Finicity services, and that absolutely should factor into the due diligence process of advisors.

2015 has been a good year for Finicity. We’ve signed hundreds of Fintech and Financial Institutions to build their solutions on our API, have quietly launched over a dozen partners, and are launching dozens more in 2016. Our partners tell us that our broad native data source coverage and our fanatical agg support teams are the primary reasons why they love us.

-Nicholas Thomas

So with relatively little marketing (e.g. as I published this, their most recent tweet was on October 27, 2015), Finicity managed to sign up “hundreds” of customers, launched “over a dozen” partners, with more on tap in 2016.

Is account aggregation Finicity’s only play in the industry? No.

To see what other lines of business Finicity offers in addition to their aggregation services, their website lists two other divisions: Mvelopes and Money 4 Life Coaching

Mvelopes from Finicity

Mvelopes is a software application for personal budgeting and has extremely high ratings for its apps in the app stores. Surprisingly high, actually (more on this later).

Mvelopes allows users to create virtual envelopes for different spending categories and allocate money to them accordingly. The idea is that throughout the month, users refer to the amount of money left over in each envelope after paying bills in order to preventing overspending. Transactions are aggregated from connected accounts, and transactions are automatically deducted from applicable virtual envelopes of available cash.

The service is free to use with a limit of four aggregated cash flow and credit accounts (here’s the Finicity aggregation connection). To access unlimited accounts, users subscribe to the Mvelopes Premier plan for $95/year.

Money 4 Life™ Coaching

Where things get more controversial for me is Finicity’s division called Money 4 Life™ Coaching. The Mvelopes pricing page makes the first mention of coaching services and describes how customers can benefit from one-on-one coaching customized for individual needs.

So I looked into this coaching services with a quick Google search and came across quite a few consumer complaints (36 to be exact) about the services on the Better Business Bureau website.

Most of the complaints seem to be centered around the Money4Life coaching including allegations of no contact by coaches for months at a time and allegations of cancellation difficulties.

Most complaints listed on the BBB site appear to reach a satisfactory conclusion once customers initiate the dispute process (which results in an overall BBB rating for Finicity of A+) , but it is surprising that many customers feel that they need to involve BBB in the first place in order to reach a resolution.

Also, the Mvelopes mobile app ratings are overwhelmingly positive, but many of the five-star reviews have no details in the description or come from users with no other app reviews other than Mvelopes. It’s eyebrow raising.

Critical Mvelopes app reviews such as the one below from iTunes are enlightening:

I contacted Finicity for comments and have not yet heard back from the company, so I will update this post accordingly.

What’s Next?

So what’s next? Given Finicity’s connection to awkward customer experiences under the Money4Life coaching program, how likely are the younger aggregation providers to migrate their API calls to the Finicity API? Or will there be a trend to simply abandon the aggregation of financial institutions currently covered by Intuit?

No matter what, as the aggregation vendors make their decisions behind the scenes, advisors’ clients will need to reauthenticate their usernames and passwords once a migration to a new aggregation service is implemented.

For some firms that have a handful of aggregation accounts, this may be a non event, but for larger firms with thousands of aggregated accounts, the issue could take weeks or months to resolve as all clients work through their accounts to reauthenticate their login credentials.